Blog

Sales Performance Management (SPM) involves multiple business processes, and hence, the procurement and implementation of an SPM Tool (such as Callidus, IBM, Xactly) requires a significant amount of planning and effort.

The planning must start long before you schedule vendors demos. There is no point in conducting vendor demos if your organization is not yet prepared to travel the road towards SPM automation. So how do you go about evaluating your preparedness?

To determine your organization’s readiness for an SPM tool, here are the top 10 questions you should answer:

1. What is the Business Justification?

The answer could be Cost Savings, Enhanced Reporting, Operational Efficiencies, Auditability, Calculating Payments or something related. Whatever it may be, if you can’t come up with a couple of strong business justifications, you will find it difficult to make a business case for the tool. Although it doesn’t all have to be about the financials, you have to be ready with a worksheet that shows the numbers. To learn how to build a business case, here is a link to a webinar that could be very helpful to you: http://bit.ly/2pvd1Ts.

2. Are the Executives on board?

Have you discussed your plans with your executives? Do they understand the high level budgetary needs for such a project? Do you have their verbal nod for a ballpark budget?

If your executives aren’t okay with the estimated budgets, maybe you have gotten ahead of yourself. Save yourself some time and initiate the vendor demos only after you see your executives warming up to the idea.

3. Are Compensation Plans Stable?

The most common reason for SPM implementation failure is that the compensation plans are in a state of flux, sometimes even changing while the implementation is in progress. Are your organization’s comp plans still going through significant changes because of evolving market landscapes? If so, you will have a tough time keeping your SPM implementation on track.

Taking this into consideration, you are not ready for an SPM tool. And yes, when you are told that the tool can handle all future changes without any time or effort, take it with a grain of salt.

4. Do you have enough Time?

From vendor demos to go-live, SPM projects will take no less than 4-5 months. If you are too close to the beginning of the new Plan Year and the deadline for Pay file is already in sight, you have probably missed your window of opportunity. If you decide to move forward at this point, you will be scrambling to move fast, thereby compromising the quality of your decisions, and creating a huge risk to the project overall. You are better off planning a mid-year rollout, which will have its own challenges, but at least you have time to plan for it.

5. Are Business Processes Mature?

When the organization is growing rapidly, HR and Finance are constantly tweaking the organizational framework. For this reason, or maybe due to a recent M&A, if the processes and policies in the organization have not yet been solidified, it is difficult for the implementation team to configure the new tool. A lot of time and effort would go to waste in changing the tool configuration again and again.

For example, if the new hire draw policy is changing every few months, the SPM tool can’t really be successful.

6. Do you have IT Systems providing Reliable Data?

SPM tools can’t operate in a vacuum. If you don’t have HR systems providing reliable Payee data or ERP systems providing sales data, you will have huge challenges with the SPM tool. Garbage in, garbage out. For instance, if new hire notices are coming to the commission administrator on Post Its, you are not ready for an SPM tool. You must first invest in HR tools and processes.

7. Is IT Leadership ready for one more Tool?

SPM implementation projects require IT budget and resources. If the IT team has resource constraints, or there is another large IT initiative, such as an ERP upgrade planned for the year, then IT will not be very happy about supporting an SPM implementation. A quick synch up with your IT leadership would help ensure that no such major roadblocks exist.

8. Is the Cloud an option?

Almost all major SPM tools are now available only as SaaS solutions, where the software is hosted in the vendor’s Cloud. What that means is, if your organization has a strong preference for On-Premise solutions, your choice of vendors becomes very limited.

It’s better to clarify with your business leaders if Cloud solutions are an acceptable option. If not, knowing the road map for all software vendors, you may want to abort the idea of packaged solutions or wait for your organization’s mindset to change.

9. Do you have Resources to support this Project?

After the tool is implemented, you may be able to cut the headcount in commission operations. But initially, you will have to dedicate a great deal of time and energy in evaluating and implementing the tool. If you are unable to free up any of your current resources and can’t find the budget to hire external consultants, it will be extremely challenging for you to get this to the finish line.

10. Is there an M&A on the Horizon?

Last but not least, if there is an M&A on the horizon, it’s better to wait on an implementation project. The new company may already have an SPM tool, and it is almost guaranteed that your business team will want a single SPM tool catering to the joint salesforce.

If you need further assistance with getting you prepared for an SPM project, please contact us at mktg@spectrumtek.com.

Back when I started my professional selling career over 35 years ago, the term sales performance management meant sitting though weekly sales meetings and performance reviews every 3 months. Sales performance management in those days had little to do with analyzing productivity, team performance, sales enablement or incentive compensation, except, if you weren’t performing, i.e. hitting your numbers, sales management took the keys to the company car in return for your last check.

24 Carat Gold Calculators

From the early to mid-90’s, sales compensation management software started to hit the market. There wasn’t much science or empirical data to drive business outcomes based on historical or regression analysis, just a more streamlined and efficient calculator of sales commissions. This software was sometimes referred to as a ‘24 carat calculator’ because of its overall cost relative to its utility. A lot of IT organizations began building rudimentary commission calculators and reporting tools more cheaply. In fact, my team worked with our IT folks at Textron Systems to build such a proprietary system in 1990 using Lotus Symphony (before IBM) on Unix / Sun Solaris.

From SCM to EIM to ICM and Now SPM…

Over the next decade or so, sales compensation management (SCM) as it became known, morphed into EIM or enterprise incentive management as finance looked to increase its focus, and control, over incentive spend relative to performance. Then, by the early to mid-2000’s, incentive compensation management (ICM) became a more common definition as incentive compensation management moved across lines of business to now include other forms of incentives, both cash and non-cash for sales and non-sales staff with varying degrees of reporting and workflow.

As the new millennium was nearing the end of its first decade, sales performance management (SPM) became the defining terminology. With advanced reporting and analytics, territory and quota planning, improved workflow and flexible user interfaces, SPM software was now the quintessential tool designed to align sales performance with company goals. Sales operations suddenly had a new face, with new responsibilities and for some, a seat at the table.

From a technology perspective, the adoption of the Cloud (SaaS) and advanced integration technologies made the economics more attractive. The newer generations of SPM software became technically superior over just a couple of years prior. For better or worse, functionality also became quite similar across vendor offerings making vendor selection even more challenging, at least visually.

SPM Software, The Devil’s in The Details and The Requirements

Today, there are nearly 30 software vendors, including the leading ERP vendors, that perform many of the common SPM functional attributes. Out of these 30 software vendors, fewer than 10 are considered to be best of breed SPM software vendors. Of these best of breed vendors, most can satisfy at least 70% to 80% of the typical functional requirements found in technically challenging RFP’s. However, any one vendor can fall short on reporting, analytics, workflow, territory & quota planning, data volumes, managing overly complex compensation plans – the list goes on.

This is why it is imperative for stakeholders to take ownership of defining, gathering and documenting requirements for their particular line of business. The most successful implementations of a SPM solution occur when line of business owners are directly involved from the onset, executive sponsorship is established and realistic project goals are set. SPM projects are like ERP projects in some ways; there are a lot of fingerprints touching various segments effecting a lot of people, the way they work and the financial impact to the company. SPM is not a compartmentalized nor a departmentalized tool.

Many SPM tools can also calculate bonuses, assign and measure MBO’s while enabling scorecard functionality, a core function for HR tools. But, they cannot perform many of the core workforce management functions such as salary administration, equity or stock distribution, deferred compensation and merit pay, together known as total compensation or total rewards. In addition, HCM tools provide a unified view across all employees that can analyze role-based performance, measure skill levels and prescribe best-fit candidates for a particular job and provide a holistic view of the total workforce.

If a top tier HCM or HRMS vendor were to acquire a top tier SPM vendor, or, the other way, around, then integrating the two successfully, while offering either as a stand-alone solution or together as one, that would be a market moving game changer. I’m surprised that hasn’t happened up to this point given the speculation and rumors that have circulated throughout the industry for years. I think further consolidation of the SPM market is inevitable, which can be a good thing.

About the Author: For more than 15 years, Tom Troiano has been a successful senior sales executive with the leading Sales Performance Management vendors including IBM / Varicent, Synygy (Now Optymyze), Callidus Cloud and Oracle. Throughout these years he has helped 100’s of companies across many industries evolve from spreadsheets and homegrown tools to today’s data driven SPM solutions supported by a strong business case. Tom has been in sales and sales management his entire career. Starting in 1980, where he led a sales team at a small startup that grew into a big sales team while designing his first sales compensation tools.

SPM operation, especially the Incentive Compensation part of it, is all about handling data. Poor data quality can significantly
drive up the operational costs and cause the sales team to lose faith in the calculations. Good data is essential to producing correct pay calculations and reports, allowing sales team to focus on delivering sales, rather than dealing with discrepancies.

But, having good clean data is not enough. SPM operations are time sensitive, and the data across various underlying systems is every changing. Hence proper data synchronization (across business and IT systems) is important as well. Different Reporting Cycles, Payroll Cutoffs, and Period specific Adjustments can’t be handled accurately, until data is clean, and well synchronized.

The following check list will help guide the decisions to deliver consistent and accurate data to the SPM system:

1. Choose the data source carefully

Companies that have a single source for revenue and customer sales data are more likely to have good data quality, thus generating the most accurate reports. Data quality suffers when companies have multiple production systems and data repositories that are managed by multiple teams. If these systems and repositories are not in sync because of different adjustment and reconciliation processes, the data quality will be poor. To insure integrity of the SMP reports, these companies must design requirements that sync up the various data sources and utilize the same data that is used for all other company reports.

2. Consider full data loads vs. incremental transactions

Based on the cost and time it takes to process sales transactions, the most common transaction loads are incremental. Because companies make periodic payments to Sales, the SPM data must be date-stamped and stored. This insures that future transactions do not alter or compromise the historical values previously used for pay calculations. Many core business systems provide the infrastructure to load incremental data without compromising the historical data. Companies with known data issues however, may resort to full YTD data loads prior to the close of each pay period. Still others still, design compensation calculations that factor the YTD data changes into the current pay period.

Companies should decide on the type of data load best suited for them, based on factors impacting their sales crediting policies such as, type of business, number of transactions, and volume of revenue adjustments.

3.Determine the impact of adjustment transaction

Adjusting sales results involves different types of transactions, including contract revisions, cancellations, discounts, claims, and pricing revisions. Three important principles should be followed to ensure good SPM data quality:

SPM data should be loaded in sync with adjustments posted in the core systems and those posted to management reporting systems

Do not attempt duplicate postings of core data adjustments directly into the SPM data loads. This could be a costly move.

Create a separate category for “SPM Only” Pay For Performance adjustments (small volume critical pay adjustments) that can be posted within a specific pay period for correcting payouts. By year end all final adjustments will be posted to the core systems and these SPM adjustments will show a net of zero.

Even the best designed data acquisition and validation processes need to be reconciled with the core system before pay calculations are executed. This is easily done by reconciling the SPM data loads with core system results during the period-ending data load process. Make sure that the revenue and other key metric values are reconciled to the same reporting periods, so that SPM calculations are in sync with other business systems.

5. Provide an easy way to create reports and data files for sales and support teams

Add customized reports and data extracting options, specifically designed as inquiry tools, to the SPM system. This will enable Sales Support and others to easily create reports whenever needed.

6. Retain “locked” multiyear data available for SPM analytics

The ‘locking’ functionality in many SPM systems allows access to detailed, multiyear performance data and provides a major advantage when producing sales team compensation analytics, internal pay plan performance trends, and business performance metrics.

In summary, the first priority in the development of a SPM Pay and Performance reporting process is to design requirements that will produce superior data quality. This includes dictating that the SPM data is in sync with your company’s sales results reporting and business metrics. Poor data quality will lead to a lack of confidence in the SPM system and Operations team, creating unease and discontent among your Sales team.

Managing sales compensation programs takes planning; focus and a daily drive towards the organizations sales performance management objectives. To discuss this further feel free to email us at info@spectrumbiztech.com.

About the Author: George O’Connell has on premise and SaaS expertise in the area of Sales Performance Management (SPM) and Incentive Compensation Management (ICM). His experience includes design, development, operations, governance, and analytics for a company with $2.5 billion in sales to over 500,000 customers. He’s managed SPM operations for a wide range of sales channels including telephone sales, sales executive channels, union contracts, new business start-ups, call centers, third party vendors, sales management plans, and director / sales VP compensation.

Over the past few months I’ve heard that statement and similar sentiments from at least four companies. All were using Gartner defined Sales Performance Management (SPM) “Leaders” ) yet all believed their SPM system was failing them. The companies complained about the lack of flexibility to adapt to their changes and some were moving to manual processes to get commission calculated.

Speaking further with these companies highlighted the same core issue at each firm and it had very little to do with their SPM technology and everything to do with their staffing decisions. For instance, one of these companies had been successfully operating their sales compensation system for over three years. Three years of success and then the onlytrained person to maintain and operate the system left the company. Then, much to the company’s surprise, everything came to a screeching halt. The company blamed the software for not being flexible enough and set off to find a new system.

While it’s easier to blame a vendor than to accept responsibility, this company was operating with a naïve assumption that anyone could step in at any time and keep the system running. IC systems are complex and require the proper staffing, training, and maintenance to keep them operating smoothly. Single points of failure are never safe (would you fly with only one pilot?). Maybe it was the original sales pitch that told them how easy things would be that led them to this point? Maybe it was a short term situation that turned into a long term situation? Regardless, if you want to minimize your risk of a service disruption and make proper use of your SPM solutions, take the following steps.

1. Document
You must maintain some minimum level of documentation. In the case cited above, there was nothing in writing – it was all in the head of the one user. Start with a simple ‘run book’ that documents the major steps in your commission cycle (i.e., data loading, calculations, QC steps, outputs) as well as a Data Flow Diagram. Each cycle, make note of special cases and exceptions and use the history of multiple cycles to guide you to process improvements.

2. Staff Appropriately and Cross-train
It’s important to have skilled people (more than one) supporting your IC system. Companies all too often fail to appreciate what it takes to manage an SPM system well – trusting too much in the tool’s much advertised flexibility. Companies that do this well, acknowledge that this is a specialized skill set and requires people who are adept at managing multiple constituencies and who are able to translate requirements to produce deliverables. Be sure to anticipate and address peak staffing needs as well by cross-training beyond your core support team (for example, you can have the person who is responsible for quota maintenance also learn your ICM system).

3. Stay Current
SPM/ICM vendors are constantly rolling out new features. Pay attention to those and proactively work to incorporate those into your configuration. That means staying on (or near) the latest version of the software as well as investing in training – both base-level training to new staff and advanced training to more tenured staff. Join and participate in local user group meetings and attend the vendor’s national conference (i.e., Callidus’s C3 and IBM’s Vision) each year.

4. Archive Old Components
Be sure to allow for time to archive and remove unused components (rules, data, reports, etc.) from your system to keep as clean as possible. Doing so extends the overall life of your incentive compensation system, keeps the processing speeds faster, and allows for faster configuration changes.

In summary, managing sales compensation programs takes considerable focus and proper staffing. Recognizing and addressing this is critical to its successful operation. To discuss this further feel free to email us at info@spectrumbiztech.com or call us at (408) 813-1443.

About the Author:Dan Ganse has 20 years of deep expertise in the area of Sales Performance Management (SPM) and Incentive Compensation Management (ICM). His experience includes assisting customers in all aspects of enterprise-wide incentive management and brings a unique combination of business and technology expertise to address customers’ incentive management issues.

The biggest competition for all the ICM packages available in the market is none other than Microsoft Excel. Excel is so ingrained in the commission world that often times, potential buyers tend to minutely compare the two and are not willing to giving the ease and simplicity of excel.

So instead of competing with Excel why not use it to your advantage. In my opinion, this is exactly what Merced has done with their calculator. That said, my post today aims to throw more light on the Merced ICM Calculator and how it works.

WHAT IS A CALCULATOR?

In simple words, a calculator is a reusable object that a user has defined for managing a calculation which is equivalent to writing a formula in Excel. The layout of the calculator UI is very similar to an Excel spreadsheet.

HOW DOES IT WORK?

A Plan is a rule or a container that holds the criteria to filter transactions based on different matching criteria defined by the user. A Calculator contains the logic to process the transactions. A user can quickly write formulas/logic using the excel like spreadsheets and test it out to make sure it produces the correct result. Calculators can also feed into other calculators. This allows users to break down complex calculation logic into smaller chunks that are easy to understand and maintain and can be reused by other entities.

WHAT ARE THE DIFFERENT TYPES OF CALCULATORS?

The different calculator types are Summary, Event, Function and Table Calculator. Each of these calculators is suitable for different types of calculations.

Summary calculators operate over a group of transactions and produce an overall result. For e.g, it can be used to aggregate transactions before computing the overall commission and achievement.

Event calculators operate on a per transaction/event basis and it is recommended that they be kept to a minimum.

Function calculators as the name suggests can be used to create functions(similar to excel) that can be referenced by other calculators.

Table calculators are typically used to define Rate Tables and such.

(Click to Enlarge)

(Click to Enlarge)

HOW IT ALL COMES TOGETHER?

Here is an example of how all the entities come together. The example shows how a single calculator can accept inputs from multiple plans to produce desired results.

(Click to Enlarge)

WHAT ARE SOME OF THE CALCULATOR DOs AND DONTs?

Calculators are very powerful and can be used innovatively to achieve the desired results. But they can easily become unmanageable and complicated if not thought out properly.

They should always be made generic by utilizing lookup tables. This makes them reusable and minimizes the number of calculators needed.

Use Summary level calculators very possible and limit the use of Event calculators as they can prove to be very expensive.

Cell references must always be in caps, for e.g A1 and not a1.

Cells with calculations/formulas should start with “=” otherwise the contents will be read as plain text.

Customers love Merced ICM calculators because they are so excel-like, easy-to-use, flexible and extensible. Most people configuring calculators have usually built out similar requirements using Excel at some point.

If I were asked to choose one single calculator feature that truly takes the cake, it would have to be the Calculator Test Mode. One can build a calculator, provide test input data and instantaneously see the calculated output including results in intermediate cells as well. And from my personal experience, all this can be done in a flash.

About Spectrum Technologies

Spectrum is a technology and business consulting firm offering specialized services in the area of Sales Performance Management (SPM) and Incentive Compensation Management (ICM). We help our customers both in end-to-end holistic SPM solutions and in specific tactical areas like Quota Management, Territory Management, Reporting/Data/Business analytics and Configuration/Price/Quote (CPQ).